KARACHI - Shell is expected to post Profit After Tax (PAT) of Rs 1.0 billion (EPS Rs14.76) for 1HCY09 - a decline of 71pc YoY. Shell is also expected to post an overall Loss After Tax (LAT) of Rs4.1b (LPS Rs60.49) in FY09 against a solid PAT of Rs5.1b (EPS Rs75.01) in FY08. According to the reports, the topline is expected to improve during the year to Rs.154b against Rs140b marked in FY08. The improved bottom-line during 1HCY09 (especially in the 4QFY09) over last year can be attributed to average rise in margins on different POL products (4pc on regulated products, especially on HSD with Rs1.35/ltr). The expected inventory gains of around Rs 330m (after-tax EPS impact of Rs 3/sh) due to a rebound in international oil prices of 71pc in 2HFY09. It is also attributed to the fact that Pakistani rupee was relatively stable against US Dollar. As far as the negative profitability during FY09 is concerned, the abovementioned factors were almost all the very major culprits in 1HFY09 (Jul-Dec08) taking Shells bottom-line into the red. Decline in volumes (-10pc YoY in FY09) is expected to offset some of the positives which took place during 1HCY09. Shell Pakistan has managed to shun the notorious inter-corporate debt issue which is creating riots in the energy chain. This has been in favour of Shell as its business model is tilted more towards high-margin business (i.e. Lubes market share at 47pc) unlike PSOs which is more into the fuel based low-margin products. As per company management, Shell has managed to reduce its short-term borrowing by roughly Rs 3b (at Rs 5b against Rs 8b in 1QCY09, thus lower financial charges expected in 2QCY09 onwards). Moreover, the outstanding dues of the refineries (around Rs 15b in 1QCY09) are also expected to have been settled while WAPDAs receivables to Shell have been received in 2QCY09 coupled with repayment of Rs 500m of PDCs. Thus, it is expected that the company will announce a cash dividend of Rs 8-10/share with the results.